Senate moves on small-biz tax breaks

The Senate overwhelmingly moved forward on legislation that would provide tax credits to small businesses in order to boost job creation and economic growth — but the floor debate could turn into a politically consequential fight over the Bush-era tax cuts.

Sen. Orrin Hatch, the top Republican on the tax-writing Finance Committee, will try to offer an amendment that would extend all tax rates for one year, GOP leaders said Tuesday.

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“Taxpayers are on the edge of a fiscal cliff, yet instead of leading them to safety, the president’s campaign is telling us to march forward,” Hatch said on the Senate floor. “The consequences will crush American taxpayers.”

Senate Majority Leader Harry Reid was noncommittal on whether he would allow the vote, saying: “We’ll move through this amendment by amendment and see what we can work through.”

Republicans in both the House and Senate want to freeze all tax rates for one year and spend 2013 developing and passing comprehensive tax reform. The GOP-led House is poised to vote on such a measure before lawmakers leave Capitol Hill for the August recess.

The overall small business bill, which cleared a key procedural vote 80-14, has two main components. First, it gives a 10 percent tax break to business on payroll for new workers or higher wages for existing employees this year. The tax credit is capped at $500,000, which Senate Democrats said would help target the tax break primarily at small businesses.

The measure, which would cost about $28.5 billion, will also allow companies to write off the entire cost of major purchases in the same year to try and encourage more business investments. The Obama administration offered its official endorsement of the Senate Democrats’ legislation Tuesday afternoon.

Ahead of the test vote Tuesday, Senate Democrats released a study showing that its small-business tax break plan would generate nearly 1 million jobs and boost GDP by $87 billion.

If it becomes law, the Small Business Jobs and Tax Relief Act would create 990,592 new jobs in all 50 states and the District of Columbia, according to a study conducted by the policy analysis firm Regional Economic Models, Inc. The study was requested by Senate Democrats.

“Creating close to 1 million jobs would put a meaningful dent in the unemployment problem,” said Sen. Chuck Schumer (D-N.Y.) in a statement Tuesday. “This tax cut is not a cure-all, but it could be a difference-maker for small firms on the fence about adding payroll. After last month’s sluggish jobs numbers, we may be on the verge of a rare moment of agreement on how to help the economy.”

A significant amount of jobs created under the Senate Democrats’ proposal would come in the retail trade sector and the health care and social assistance industry, according to REMI’s study. The analysis used data from the congressional Joint Tax Committee and the Small Business Administration.

The House passed its own version of a small-business tax cut in April — a 1-year, 20 percent tax break for all businesses with fewer than 500 workers — but Senate Democratic leaders have opposed that measure.